Exposed: Devastating New Claims Conference Scandal

May 18, 2013

Last month I devoted a column to the ongoing disgrace of the Claims Conference and the failure by the management to take appropriate action to provide financial assistance to ailing survivors unable to afford food, medicine and other basic necessities to enable them to live out their remaining years with a modicum of dignity.

I also drew attention to the scandal of the $57 million embezzled over a 15 year period by Claims Conference employees in the New York head office. I maintained that it was outrageous that the management responsible for overseeing these funds, failed to accept any responsibility or accountability. Instead, they shamelessly manipulated the board to carry resolutions expressing “complete confidence in the leadership and management”, extolling their purported “commitment to the principles of transparency … integrity, fairness, accountability, dialogue and … the highest ethical standards”.

This week, Paul Berger an investigative journalist for Forward, the American Jewish weekly, published a devastating investigative exposé demonstrating that the Claims Conference senior management had received copies of an anonymous letter in June 2001 warning them about the scam which resulted in the theft of at least 57 million dollars of funds earmarked for survivors, but failed to follow it up. The letter, providing evidence of the fraud orchestrated from the New York office, was sent to the current Executive Vice President, Greg Schneider, who was then the Claims Conference Chief Operating Officer and his now retired chief, Gideon Taylor.

Despite the fact that numerous employees followed up the letter and expressed concern regarding the allegations and their discoveries, the investigation was quashed by Semen Domnitser, the Claims Conference manager who was convicted on May 8 this year in a federal court for being the ringleader of the fraud.

Berger reports that Schneider refused to respond on record to inquiries from Forward as to why the allegations were not followed up. Initially, a spokeswoman merely stated “all the participants in the fraud have now been found guilty and we consider this matter closed”.

Subsequently, sensing the mounting public concern, the management released a statement to the Jewish Telegraphic Association (JTA) insisting that the current chief executive, Greg Schneider, who was then the chief operating officer and director of allocations, was not involved and laid the blame on others. “The entire investigation that occurred did not include Greg and involved people senior to him” stated the spokesman. All Schneider received was “a third CC” explaining why the letter was not followed up.

This is absolutely mind-boggling. For a start, this was the first time the Claims Conference has ever conceded that they had been negligent over the issue and that senior executives were in fact responsible. But they leveled blame for the oversight, enabling the fraud to occur in the New York office, against Dr. Karl Brozik one of the senior German heads of the Claims Conference located in Berlin. However, Dr. Brozik had passed away in August 2004 at the age of 78 and is therefore unable to corroborate the latest story or defend himself. Perhaps, coincidentally, no blame has been apportioned to any living executive officer.

It is now clear that, despite repeated previous appeals over many years by outside parties urging the Claims Conference to impose more effective supervision, gross negligence was the order of the day. But even more scandalous are the attempts by Executive Vice President Schneider and Chairman Julius Berman to present themselves as heroes and claim credit for having uncovered this fraud. In fact, they were engaging in systematic and deliberate efforts to conceal the incompetence and breakdown of their management and leadership which enabled this fraud to occur under their very noses.

Chairman Julius Berman reiterated nauseating statements praising Schneider’s performance in relation to allegedly uncovering the fraud. Berman also orchestrated the incredible resolutions praising the impeccable performance of the management which were rubber stamped by his compliant board.

Indeed, there is little doubt that had the matter not been raised during the criminal trial and astutely followed up by Forward’s Paul Berger, this aspect of the story would have effectively been permanently covered up. Instead of being informed of the true facts, we would continue hearing Julius Berman and Greg Schneider praising themselves for having “discovered” the fraud.

Moreover, Berger noted that at the trial, Schneider even had the chutzpa to express “shock” over the massive $57 million fraud that he had previously not bothered to verify and then sought to cover up his failure to do so.

The Claims Conference was created to represent the Jewish world for the purpose of obtaining restitution and providing assistance for Holocaust survivors. There is now absolutely no question that the executive officers and leadership failed in their obligations over the years to respond to calls to provide more effective oversight.

In the light of what has been revealed, the board has a moral and fiduciary obligation to demand the dismissal of all senior office bearers and to introduce a process designed to restructure the organization.

We can now appreciate why the management fought so desperately to prevent a genuinely independent audit and review which, under normal circumstances, would automatically have been implemented in the wake of such a huge fraud involving public funds. The board would be well advised even at this late stage, to introduce a broad independent review in order to satisfy the public that there are no additional skeletons.

There has clearly been a total breakdown in accountability but no less concerning is the unconscionable cover-up which was even concealed from the board. Failure by the board to act now could create the greatest upheaval in global Jewish organizations since the postwar era.

The board includes representatives of the most prominent global Jewish and Israeli bodies including the Jewish Agency for Israel, the World Jewish Congress, the American Jewish Committee and major national Jewish communal umbrella bodies such as the Board of Deputies of British Jews, CRIF from France and the Executive Council of Australian Jewry. The representatives and heads of these organizations will be held accountable if they procrastinate and fail to immediately demand the resignations of the key officers.

There are already plans afoot by a committee to identify and challenge the heads of the organizations and their board representatives. This will not merely result in public confrontations and protests. The Claims Conference is the wealthiest and one of the most important organizations in the Jewish world dispensing billions of dollars. The directors must be made aware that if they fail to implement their fiduciary responsibilities, they may also face major legal challenges.

Setting aside all other considerations, this crisis may also provide an opportunity to ensure that all discretionary financial allocations by the Claims Conference are frozen and, for the time being, funds must be directed solely toward the ailing Holocaust survivors whose shocking living conditions represent a disgrace to the entire global Jewish community. Survivor organizations are already now preparing to petition courts on their behalf in the light of this extraordinary exposé.

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As this column is being released we have just been informed that Ronald Lauder the President of the World Jewish Congress has formally sent the following letter to Julius Berman, the Chairman and to Greg Schneider the Executive Vice President of the Claims Conference.

“1. Was the existence of the aforementioned letter of June 6, 2001, and the subsequent communications regarding that letter among members of the Claims Conference professional staff ever disclosed to the Board of Directors and/or the members of the Executive Committee of the Claims Conference, or other members of the Claims Conference key professional staff?

2. If yes, when did such disclosures occur, and were they duly minuted?

3. If not, why not?

In addition, as I believe that this is a long-term issue with potentially serious implications, I have asked Robert Singer, the WJC’s new CEO, to appoint a task force chaired by Michael Schneider and including himself and WJC General Counsel Menachem Rosensaft to deal with and follow through on this and related issues.”